It’s hard to remember when a major economic development announcement has generated a dichotomy of opinion as stark as the one that greeted the announcement that Elon Musk’s xAI supercomputer will be located in Memphis.
The announcement produced a carefully choreographed announcement by the Greater Memphis Chamber and congratulatory – if not fawning – media coverage. Meanwhile, social media was swamped by people who felt manipulated because of the lack of details to convince them that the project is good for Memphis.
The diametrically oppositional points of view are striking in the extreme.
But then again, so is Elon Musk, a hero to some business leaders as his innovations seem to excuse his management of X into an undemocratic and hate-filled cesspool of disinformation (and now pornography). To many of us, he represents all that is wrong with blind allegiance to American capitalism and wrong with social media that is not only tolerant of but feeds fascistic ideations and rationalizations.
A Cautionary Tale
Then, too, there is the underlying distrust left by Memphis’ last brush with the Musk family. It is a cautionary tale.
It took place when Kimbal Musk, Elon’s brother, signed on to open the first restaurants at Shelby Farms Park. It was hailed by local and national media as putting Memphis at the center of the “food revolution” that Kimbal Musk was championing as “real food” that nourishes the body, the farmer, and the planet.
The Kitchen and the grab-and-go Kitchenette were opened to fanfare in August, 2016. Two years later, he shut their doors.
It was largely the same thing at Crosstown Concourse. He opened Next Door American Eatery there in September, 2017, with a sales job that would have impressed P.T. Barnum. He extolled the Memphis vibe which is “so welcoming” and said the “Americana here gives me goose bumps.” It resulted in a burst of positive national publicity about the “self-proclaimed philanthropist” and what he was undertaking in the home of Elvis Presley.
In March, 2020, he closed his Crosstown Concourse outpost. Right before he put 100 Memphians out of work, he cut off employees’ access to the Family Fund, an emergency fund for employees in crisis. The fund was a pool of money from employees’ paychecks.
But employees weren’t the only ones stiffed by Kimbal Musk. There were also the generous Memphians from whom he received millions of dollars on the promise that they would pay for the restaurants and its profits would then fuel his philanthropic work here. He painted a grand vision of how he was going to transform American eating but here, he was known chiefly for his “learning gardens” at schools across Memphis. There, students were to be taught healthy eating and growing. Before the plants in the school gardens had seen more than a couple of growing seasons, he had packed up and left the city.
Musk World Returns
As a result, the last time the Musk world intersected with Memphis it left vivid memories of big promises and hyperbolic headlines that left Memphians feeling exploited and others scrambling to fill empty restaurant space and find new jobs.
That brings us to his brother, Elon, and the announcement that he will put the world’s biggest supercomputer in Memphis. Like the time when his brother was greeted so wildly by this community (this time, it was the head of the Greater Memphis Chamber who said he had the “goose bumps”), the present Musk announcement featured rave reviews and outsized promises.
All in all, it creates a stew of emotions and concerns that may not be fully grasped by economic development officials. Put simply, what’s needed now more than anything is transparency, more than economic development agencies are accustomed to at this point in the wake of a major announcement.
There were precious few details, not even the cost of the project. (The Frontier supercomputer at Oak Ridge National Laboratory in East Tennessee cost $600 million.)
If the online comments can be boiled down to a single question it is this: we know that there are people assigned to sell Memphis and close economic deals but who is negotiating on behalf of the public good?
Missing Details
That’s not to say that Chamber officials are not sensitive and committed to the public good, but its job is first and foremost to sell Memphis to new companies like xAI. From media accounts, it did its mission well. There had been rumbling for a few weeks that a big announcement was imminent but an announcement with supercomputer and Memphis in the same sentence was unexpected.
Politicians and business leaders were quick to pat the Chamber, MLGW, and TVA on the back for a job well-done. It was not hard to imagine that as Mayor Paul Young made his obligatory comments celebrating the announcement, he was recalling the Chamber’s opposition to his 75-cent tax increase on the basis that it would threaten its billions of dollars of projects in the pipeline.
A constant concern online is that more details will not be forthcoming until a meeting of EDGE where xAI will undoubtedly be seeking a tax break. It is easy to predict that the public will explode if they first learn about the details of the deal just as its local tax breaks are approved.
It has been said that the final package of incentives are still being formulated and that may be true but surely a specific number was batted around in the negotiations with the company.
Electrolux Redux
It is widely expected that xAI will locate in the vacant Electrolux facility at 3231 Paul Lowry Road (aka 3231 Riverport Road) in southwest Memphis. None of us know how much the incentive package will be for the supercomputer but for frame of reference, it’s worth remembering that the state and local incentives for Electrolux totaled $188.3 million. In the end, government incentives were about three times more than what the company invested in the building.
At the time, economic development officials of course said the positive economic impact of Electrolux outweighed the cost of the tax breaks.
Electrolux opened in 2012 with the promise of creating 1,240 fulltime jobs. It never reached that number, peaking at 1,100 in 2017. Unbelievably, the contract prevented government from “any recapture, clawback, refund or similar remedy” if the company did not create the 1,240 jobs or if it left Memphis early. By the time Electrolux closed in 2020, only 530 people were working there.
To make matters worse, state and local governments borrowed money to pay for the cash grants to Electrolux, and a document at the time said the bond debt would not be paid off until 2036.
Nominal New Jobs
The Electrolux building has 750,000 square feet. Supercomputers require only a fraction of that space, and it’s not clear if xAI would ever agree for an ancillary or complementary company to share space.
As for the supercomputer itself, if you look at online videos of them, it is striking that you rarely see a human being. So it suggests that the number of new jobs created by it will be nominal, and since the xAI headquarters are in San Francisco, it raises the question of whether the serious AI work will be taking place there and from there connecting with the supercomputer here.
That said, most questions here are about water and electricity. It has been said that the xAI has asked for 1,300,000 gallons of water a day, but based on water usage by other supercomputers, that might be an optimistic number.
Massive amounts of heat are generated and more water is needed to cool equipment. It’s been said that xAI plans to use recirculated water for cooling initially and it has been said – not by the company – that it is amenable to a grey water plant.
It would be good to see that in black and white in an agreement between MLGW and xAI.
No Hero Ball
In addition to assuring everyone that there is enough water, MLGW took a command pose, rushing to say that the company’s electricity needs can be met as well. One commenter replied that the comment was cold comfort since the utility has 440,000 customers and it can’t even handle them without blackouts.
It has been said that xAI plans to build an electric substation in order to meet its deadlines and electricity needs and it would eventually be turned over to MLGW. Again, we have not seen an agreement setting this out in black and white, and hopefully to get the best deal possible, MLGW will not act like a teenage boy on his first date.
The public is not asking unreasonable questions and we are past the time for all the hero ball media coverage. It’s time for people in the know to communicate directly with them and provide them with answers.
Economic development officials must recognize the undercurrent of public apprehension by hitching Memphis’ economy to anything connected to Elon Musk. His business practices are marked by chaos, nasty X comments, a barrage of lawsuits, compulsive decision-making, personal volatility. and of harassing treatment of his employees.
Doomsday
At a time when university courses are being taught on the perils of AI as an existential threat, it will be interesting to see if Memphis becomes a hub for whatever is to come. Computer scientist Geoffrey Hinton imagines a time when AI can simplify the engineering of synthetic bioweapons and concentrate surveillance power into the hands of the few and how a rogue AI could pursue its own goals despite the commands of its creator.
The Doomsday Clock warns the public how close we are to destroying the world with dangerous technologies. Midnight is the end of the world. The farthest from midnight the clock has ever been was 17 minutes at the end of the Cold War. It is now 90 seconds.
Optimists among us believe that somehow humanity will step forward to make sure that AI is not a destructive force it could be. That may require superhuman effort so here’s hoping that if there is a supercomputer in Memphis and it is connected to Elon Musk, he will rise to the occasion and become part of the solutions to the threat rather than an accelerating force for its darker side. I’m not taking any bets.
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I am by no means a fan of Elon Musk. Twitter….errr….X, is actively undermining the foundations of our democracy. If one discounts income from regulatory credits, Tesla has yet to turn a profit. Star Link satellites are the equivalent of plastic bottles + disposable cell phones in space which has significantly increased the risk of triggering a Kessler syndrome event. I could go on…
With that said, I am surprised by this post from SCM. What happened to simply advocating for an open mind, eyes and ears while maintaining a calm, professional patience in the meantime?
“It has been said”, “It suggests”, “…concern online…”, ect. ? Summarizing this angst as advocacy for transparency is noble. But this goes beyond that to lend credibility or substantiating social media conjecture with additional conjecture.
99% of the brouhaha being generated, both in favor of and seemingly opposed to the investment (whatever it turns out to be), is built on rampant speculation. Lines are being drawn and all we really know is a computer is involved. We know nothing of the actual proposed scale, monetary value, associated temporary or permanent employment, the wages of said employees, location, phasing or infrastructure requirements.
But judging someone by their relatives’ actions? Citing Electrolux when- again- we have no real information by which to make a comparison? Utility demands when- again- no actual demand or phasing has been proposed? Technological doomsday? Really? We may all fear the potential of Skynet, but that inevitable outcome (be it a new golden age or the apocalypse) will occur whether said calculator is built in Memphis or Mumbai.
All the angst may turn out to be justified, but let’s hold our judgment- or allusions to bias- until given actual reason to riot.
I would suggest that the biggest sin committed was (in hindsight) a premature announcement that came not from xAI, but from our Chamber. I cannot imagine the motivation there, but I can say that I for one feel starved for any positive news regarding this city’s trajectory be it a glorified data center or otherwise. That may turn out to be counter productive to the theme of emploring local officials to share more information earlier in the process.
I post this not as broad criticism of SCM, but because I respect the balanced and logical viewpoint so often expressed here.
“99 percent of the brouhaha … based on rampant speculation … “
Goodness gracious! How nasty! Let us maintain our patience, everyone!
C’mon. Some things shock the conscience. It is fair shooting for SCM to unload this well-informed timely piece while boosters applaud and vested interests cut deals. As one of them said, Memphis moved quickly to beat out other cities. Game on. From Mayor Young:
“ Unless you have been totally off the grid, you probably know that this was a big week for Memphis. We announced that our city will be the home of the world’s largest supercomputer, or as Elon Musk likes to call it, the Gigafactory of Compute.
This feat was accomplished by the collaborative efforts led by our amazing Greater Memphis Chamber team, who, together with our City teams and those at MLGW and the County, were able to pull off what no other city could. Together, we landed a very very very big fish. The accomplishment is enormous, and the impact will be historic. This is a transformative moment for Memphis.”
— John Branston
I guess I’m just not ready to declare myself shocked and dismayed until I know the facts. It’s amplified by a strong aversion to internet hearsay. I fault proponents for many of the same issues mentioned above, even if they are on the other end of this spectrum.
Cash-strapped Memphis and MLGW are playing Let’s Make a Deal with a really rich guy and you are bravely calling out …. a blog?
JB
Please cite the exact amount we are being asked to pay based on something other than what you read about on Nextdoor (or a similar source) and I will be the first to light the torches.
Thank you for this trenchant bit of Musk family history in Memphis.
Let me be clear: Elon’s whole m.o. was to build his wealth off taxpayer subsidies. He sold the green tax credits he obtained in California to out of state companies who were heavy polluters and who couldn’t qualify for CA tax credits. That’s how he made his first several billions. CA cut off his gravy train so he took his business to Texas. He has ruined local land. He’s insatiable. Clearly, Elon’s brother learned from his brother.
There’s not a snowball’s chance in hell that Elon came to Memphis without promises of tax subsidies. He will employ the bare minimum number of people for his operation. He won’t give back to Memphis. I can only think that, given all we know, the Greater Memphis Chamber either didn’t research Musk’s history, dazzled by his name or that they don’t care. And that maybe the very conservative members of the Greater Chamber are aligned with Musk’s reckless support of the dismantling of the SEC, anti-labor policies and finding ways to renege on promises to his employees. Memphians will be paying dearly for the water Elon’s Super Computer uses up. That’s a promise.